This Is How Marijuana State Laws Are Affecting The Cannabis Market

As it currently stands, 29 states have passed state legislation that allow commercial marijuana sales either for medical or recreational uses. Although we consider the U.S to be lagging behind its neighbor Canada in terms of marijuana legislation, a steady stream of positive news over the past couple of months has indicated that this could be changing for the better.

One instance of such news is that earlier this year Nevada became the fifth U.S state to allow marijuana sales for recreational purposes, banking on the expectation that millions of tourists who visit Las Vegas and other Nevada cities would make up two of every three purchases.

Another encouraging news report indicated that although still illegal on the federal level, the U.S patent office reports that it has been issuing cannabis patents to a growing market. About 500 cannabis related patents are currently active with three of the largest areas focusing on; cannabis composition, characterization of CBD compounds and how they engage with human endocannabinoid receptors and methods of treating diseases with CBDs.

Also, while in the past the Drug Enforcement Agency has indicated that it would consider granting additional licenses to cultivate marijuana for research, the agency is yet to approve any new grow operation leaving us to speculate that this could just have been a PR scheme.

Nonetheless, the cannabis market has never been hotter as can be illustrated by the increasing number of growing operations and reported a looming shortage in Nevada. But the shortage has nothing to do with a lack of supply from growers, rather an effect of inadequate laws with regards to current regulations.

According to state laws which were in place, alcohol wholesalers were given exclusive distribution rights for cannabis. So far 47 dispensaries have secured licenses to sell cannabis in Nevada but regulators haven’t yet approved any wholesale distribution operations hence causing this shortage as the dispensaries are unable to resupply.

Apparently, not many alcohol wholesalers showed interest in distributing cannabis considering that by the end of May only one alcohol wholesaler had applied for a cannabis distribution license in the state and with good reason.

Liquor licenses are obtained from the federal government and since marijuana is still classified as a schedule 1 controlled substance at the federal level, wholesalers who choose to also distribute marijuana could be at risk of getting in trouble with the regulatory agencies.

To work around this predicament, Nevada’s tax commission was forced to vote unanimously to expand the applicant pool beyond alcohol wholesalers to those who already had clearance to distribute medical marijuana in the state. By last week only two alcohol wholesalers were licenses to transport cannabis which helped prevent the county from going dry.

Considering that some estimates indicate that the legal cannabis market in the U.S could top $50 billion in sales by 2026, how do the other states compare in terms of their legislation?

An overview of select states that have legalized cannabis

Including Nevada, seven states have legalized recreational marijuana with their own individual restrictions for use or possession. For instance, in California which passed laws to allow for medical marijuana possession as early as 1996 with the passage of Prop 64 allows adults over the age of 21 to possess up to an ounce and grow up to six plants per household.

Furthermore, new proposed laws call for nearly 20 types of different licenses which include testing labs, delivery services, and dispensary operations and for the cannabis market to really take off these policies will have to be ironed out so as to integrate with the newly passed recreational use regulations.

To that end, Governor Jerry Brown’s administration released documents outlining proposed changes to the standing laws stressing on the need for a single regulatory framework in order to avoid duplicating costs and bringing confusion to businesses.

In the proposal put forward, the administration suggests allowing a single entity to hold licenses to grow and sell cannabis while at the same time barring one entity from owning more than three retail stores and a farm larger than four acres.

Getting all the nuts and bolts in place before January 1, 2018 (which is when legal recreational sales in the state are expected to start) is particularly important taking into account the fact that the California market alone is expected to be worth $7 billion with state and local governments expecting to rake in $1 billion in annual taxes.

On the other hand, in Michigan where only medical marijuana is legal, the number of patients with medical marijuana cards has been on the steady increase with the most commonly cited reason by 80 percent of cardholders being severe and chronic pain.

According to conservative estimates, Michigan’s cannabis market is worth about $700 million but this figure could explode higher thanks to a petition drive that is currently underway which seeks to put a proposal on the November 2018 ballot to legalize recreational marijuana use.

With more than 211,000 qualified patients growing their own cannabis and an additional 37,000 registered caregivers also running their own grow operations Sen. Rick Jones still feels that more should be done in terms of regulation. “What we have now is totally out of control like the wild, wild west,” according to the Senator.

This stems from the fact that while patients and caregivers are allowed to grow their own cannabis, transferring it to another patient or anyone else was declared illegal by the Supreme Court and dispensaries facilitating such transfers needed to be shut down but some municipalities have been on the spot for letting such dispensaries operate unchecked.

For places like Hawaii, patients haven’t been able to access medical marijuana since the state hasn’t allowed dispensaries to sell their product just yet. This is because the state is yet to certify any labs to run the required safety tests which means that dispensaries have been sitting on product they can’t move while still incurring operational costs.

In fact, dispensaries such as Aloha Green have been incurring expenses of up to $100,000 per month without making any sales and has instead been forced to use its commercial space for patient outreach services and informational public visits.

In conclusion, although we can’t go into in-depth detail of all cannabis state laws in a single article, we believe that this is enough to shed more light on the effect they bring to the broader industry and why state legislation needs to do more in order to unlock the full benefits of cannabis legalization.

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The Wealthy venture capitalist is a series of industry-focused Investment articles focused on showing everyday Investors new opportunities in rapidly growing, little-known stocks in 4 of the markets hottest sectors: Biotech, Technology, Medical and Recreational Marijuana, and Consumer products.

About Us

The Wealthy Venture capitalist is a series of industry-focused Investment articles focused on showing everyday Investors new opportunities in rapidly growing, little-known stocks in 4 of the markets hottest sectors: Biotech, Technology, Medical and Recreational Marijuana, and Consumer products.

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